Sustainability takes root - Why sustainable business means better business
Authored by Suzanne Scatliffe, Director, Global Sustainability, AXA XL
Sustainability is not just a good thing to do; it’s good risk management. Integrating sustainability into business practices up and down a company will become even more important as companies seek to address the challenges of climate change, the changing priorities of their customers, and the risks they face. Suzanne Scatliffe, Global Sustainability Director at AXA XL, discusses how insurers can help clients to make sustainability a part of risk management and the steps AXA XL is taking to have sustainability at the heart of what we do.
Risk management and sustainability go hand in hand. In our business of helping companies to withstand threats and build for the future we have a great oversight of how improving sustainability can reduce risks and promote resilience.
As companies across all industries address the challenges of a changing climate, macroeconomic turbulence, shareholder activism and increased competition – to name but a few, it’s clear that incorporating sustainability into business practices is not just a good thing to do, it’s vital.
Making sustainability a part of how a company operates and integrating sustainability into the day-to-day workings of a company, is now recognised as both a way to better manage risks and an opportunity for responsible growth.
Companies rely on prosperous communities and healthy ecosystems in order to thrive, but our world has only recently realized these interdependencies. It’s now an imperative for businesses to stop perceiving natural and social capital as unlimited and instead consider how we can take a more balanced, and therefore sustainable, approach to operations and supply chains. Outdoor clothing company Patagonia Inc. has blazed a trail in encouraging customers to mend and reuse old clothes instead of buying new. Not only has the brand gained a cult following and increased brand recognition as a result, this has also translated to the bottom line.
In 2011, Patagonia launched its now famed “Don’t Buy This Jacket” advertising campaign, encouraging consumers to repair old clothing rather than replace it. The company has subverted the so-called ‘Black Friday’ and ‘Cyber Monday’ discounts by encouraging consumers instead to think about the environmental impact of fashion. In 2016, when the brand pledged to give 100% of Black Friday sales directly to nonprofits working to protect air, water and soil, it saw record-breaking daily sales of some $10 million – great news for the nonprofits and a sustainable way to build brand awareness and loyalty.
Other companies too have seen the benefits of integrating sustainability into the way they educate and engage consumers. Mayonnaise brand Hellmann’s, for example, has since 2018 had a focus on reducing global food waste and making sustainability a key differentiator in the customer’s buying-decision. The brand’s ‘Make Taste, Not Waste’ campaign encourages customers to use up leftovers – by adding mayonnaise – and its website offers customers access to recipe hacks to use up food that would otherwise be thrown away.
Since it began its focus on reducing food waste, Hellmann’s has seen sales increase; in 2020 year-on-year sales were up 10%, in 2021 this figure was 11%.
Hellmann’s parent company, multinational giant Unilever, is making water sustainability a focus for the coming years. It plans to implement water stewardship programmes in all of the most water-stressed areas in which it operates by 2030. While this is a socially responsible action, it’s also a move aimed at reducing the risks the company itself faces; 40% of all its global manufacturing sites are in water-stressed areas.
One example of a way Unilever is making water stewardship a part of its day-to-day business is at one of its ice-cream manufacturing plants in Turkey. The company is recycling and reusing the water needed for that plant in a bid to stop depleting groundwater levels.
The company is also trying to make it easier for consumers to use less water in their daily lives; by 2030 it is aiming for all of its product formulations to be fully biodegradable – which protects water resources – and it’s producing products that don’t require water for use at home, like a range of hair conditioners that do not need to be rinsed, making products accessible to customers in areas at risk of water stress.
These companies, and many others, have understood the link between sustainability, stakeholder engagement and management of risk. This is not a quick fix, however, building more sustainable businesses must be a continually evolving process.
While promoting sustainability credentials can be good for business, companies in all sectors are keenly aware of the need to avoid ‘greenwashing’ – the practice of making themselves appear to be more environmentally-friendly than they really are.
Greenwashing can take many forms – both deliberate and accidental – and can include hiding individual bad practices behind industry-wide standards of good practice, highlighting positive practices to draw attention away from less-environmentally-friendly elements, changing sustainability targets and goals before they have been met, and hiding sustainability data, among other things.
Several household name corporations have had accusations of greenwashing levelled at them in recent months by activists, stakeholders and ‘citizen journalists’ empowered by 24/7 social media activity. Companies are also now under increased scrutiny from regulators keen to ensure that these companies are making good on their sustainability pledges.
The UK Competition & Markets Authority last year announced its first official investigation into greenwashing, with an initial focus on the fashion industry.
Just as getting sustainability campaigns right can build a brand, greenwashing, on the other hand, can result in reputational damage.
The role of insurance
We recognise that as an insurance company we have a part to play in helping our clients on their journeys to better sustainability. Just as we work with them to understand their risks, we are aware of the need to integrate sustainability into that risk management framework. The two go hand in hand; indeed, sustainability is risk management.
Of course, we also need to practice what we preach – for the long-term sustainability and profitability of our own business, as well as to better help our clients. This month, we have launched the next phase in our sustainability strategy.
Our ‘Roots of resilience’ strategy has three main pillars; valuing nature, addressing climate change, and integrating environmental, social and governance (ESG) factors into our business operations.
We aim to protect and restore nature by increasing biodiversity awareness and by inspiring both our clients and our colleagues to have nature at the heart of their own plans.
We are working towards a net zero future by publishing a net zero roadmap, engaging colleagues across the business to develop sustainable products and solutions for clients, advancing thought-leadership on equitable transitions to a low-carbon economy, and investing in societal-led climate solutions.
We know that incorporating ESG principles at every level of our business, from the bottom up, will increase our own resilience. We will be training our colleagues, working with our supply chains, and listening to internal and external partners to learn where ESG considerations can be better embedded across our company’s processes and practices.
As a company we are continually learning – and so are our clients. We recognise the need to work alongside them to identify risks, both current and future, as well as opportunities to incorporate a sustainability mindset into risk management decisions. Only by working collaboratively can we promote a more resilient future.
About AXA XL
AXA XL is the P&C and specialty risk division of AXA which provides property, casualty, professional and speciality products to industrial, commercial and professional firms, insurance companies and other enterprises, here in the UK and throughout the world. With underwriting teams based in the US, UK, EMEA and Asia Pacific regions, we can make decisions close to the markets you serve and work with you to tailor cover to your business needs.
We help businesses adapt and thrive amidst change. Rather than just paying covered claims when things go wrong, we go beyond protection into prevention so your business can go beyond the unexpected.